Car loans, like any other type of loan, have a set repayment duration. The ideal car loan length for your circumstances will be influenced by a variety of factors. Still, it frequently comes down to striking the right balance between a lower interest rate and overall affordability. Before committing to any auto loan, we advise you to do some research and learn about the average car loan length.
Car payment statistics 2026
- For new cars, the average monthly payment is $767, and for used cars, it’s $537.
- In the fourth quarter of 2025, the average loan amounts are up again, with new car loans averaging $43,582, and total auto loan balances have risen to about $1.68 trillion, representing nearly 8.9% of total consumer debt.
- Credit union financing accounted for nearly 22.24% of all auto loans during the same timeline.
- The average monthly cost of car insurance for full coverage is $225 per month and for minimum coverage is $68 per month.
What is the average car loan length?
The most common car loan length for new and used cars is 72 months. The average car loan length varies, but 72 months is slightly longer than in decades past.
The popularity of the 72-month term appears to be increasing, and the reason for this is likely because it is simpler to finance than a 60-month loan due to the spread out of payments.
However, 84-month loans have become more prevalent as the reduced monthly payments appear more appealing to buyers. In Q4 2025, loans of 84 months made up 20.8% of new car purchases.
How much will my car payment be?
The cost of the car isn’t the only thing that goes into figuring out the average monthly car price. Your projected monthly payment is based on how much you are borrowing to buy the car, your interest rate, and the loan length.
| Parameters | New cars | Used cars |
| Monthly Payment | $767 | $537 |
| Loan amount | $43,582 | $27,528 |
| Interest rate | 6.7% | 11.9% |
| Loan term | 68.9 months | 67.7 months |
Short-term and long-term car loans: Pros and cons
| Pros of a long-term car loan | Cons of a long-term car loan |
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| Pros of a short-term car loan | Cons of a short-term car loan |
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Why do people prefer longer car loans?
Individuals with bad credit have longer loan terms on new car loans than those with good or excellent credit. The typical new-car loan duration for people with credit scores ranging from 781 to 850 is roughly 65 months. The average loan period for those with credit ratings of 500 or lower is slightly over 72 months.
a) Lower monthly payments
A lower monthly loan payment is the main benefit of a longer loan term. Assume you’re financing a $30,000 new automobile over five years at a 3% APR with no down payment in a state where there is no sales tax. Each of your monthly payments would be around $540. If you choose a seven-year loan with the same other loan parameters, your monthly payments would be around $400, a difference of around $140 each month.
However, keep in mind that a longer-term loan requires larger payments. In this case, you’d make 84 monthly payments on the seven-year loan instead of 60 payments on the five-year loan. The longer loan will also cost you more in interest over time.
b) Freed up funds
Assume you’re picking between a 60-month and an 84-month car loan. The lower the monthly payment, the longer the loan term, which may free up funds to pay down other high-interest debt more rapidly. However, this only makes sense if the interest rate on your debt is much greater than the interest rate on your car loan. On the longer-term loans, you’d be able to pay off your higher-interest credit card debt in less time, potentially saving you more interest in the long run.
What is the average term length for a new lease?
Experian reports that the average new car lease term in Q4 2025 was 36 months, which is roughly 3 years. By comparison, the average new car loan term in the same period was 68.9 months, showing how much longer buyers take to pay off financed vehicles versus leased ones.
How to strategize for better car loan payments
1) Use low APR loans to increase cash flow for investing
The only time to take out a long-term loan is when the APR is really low. For instance, Toyota has given 0.9% 72-month loans on select vehicles. Instead of tying up your funds with a hefty down payment and high monthly payments on a 60-month loan, use the money you save for other investments that could provide a larger return.
2) Refinance your bad loan
Nothing is lost if your emotions take over and you sign a 72-month loan on that sports coupe. Assuming you have acceptable credit, you may be able to refinance your auto loan without incurring any fees or penalties for prepayment.
3) Make a large down payment to prepay the depreciation
Putting a substantial down payment might prevent falling underwater if you opt to take on a lengthy loan. If you do so, you can trade in the vehicle without being required to roll negative equity into the next loan.
4) Lease instead of buying
If you desire that sports coupe but cannot afford to purchase it, you may likely lease it for less money upfront and lower monthly payments. Weintraub recommends this option to their clients, especially since there are so many excellent leasing bargains. Then, if you still desire the automobile at the end of the lease, you have the option to purchase it at the residual value mentioned in the contract.
Alternatives to long-term loans
Suppose you want to buy a new car but are unable to afford the monthly payments for a conventional five-year loan. That may indicate that you are purchasing beyond your budget. In this scenario, you might want to use an auto loan calculator to understand how much you can afford.
You might also consider purchasing a used car. Used automobiles have higher interest rates, but they cost less. This means there is less to borrow, and monthly payments should be lower.
Keep in mind that the used car market in 2026 is extremely overpriced, and it is difficult to get a fair deal. We advise you to thoroughly go through the loan terms before committing to one.
How to calculate how much your car costs
Aside from the regular payment, there may be other costs. These costs include things like gas, insurance, and repairs. But you should also save money for accidents that you can’t plan for, at least enough to pay your deductible. Before you buy a new car, you could get an estimate.
Use the car maintenance calculator online to figure out the usual cost for your car’s maintenance. Then, add this number to what you think insurance will cost. Even though it’s not required in every state, the average driver should be ready to pay around $170 a month.
Then, add how much you think fuel will cost. This number is based on your car’s average miles per gallon, how far you think you’ll drive each month, and how much gas costs on average in your area. Lastly, consider the fees, taxes you’ll have to pay, and how much the car will lose value over time.
How refinancing can change the length of a car loan
Refinancing your auto loan is possible if it becomes unmanageable, you want to pay it off early, or you want to save money with a reduced interest rate. When refinancing a debt, you obtain a new loan to pay off the old one. Your new loan could provide you with better conditions or a lower interest rate.
To reduce your monthly payments, you could extend the period of your loan when you refinance, for instance. Ideally, you would also be able to obtain a new loan with a reduced interest rate, which might save you money over time.
Consider refinancing if your income, credit score, or debt-to-income ratio improves. These criteria are utilized by lenders when determining whether to extend a loan.
If you find a better offer than the one you signed up for initially, it may be worthwhile to consider refinancing. In addition, if you opt to reduce the duration of your loan, refinancing could also help you pay off your auto loan faster.
Refinancing can be more difficult if you have terrible credit, but locating lenders prepared to provide you with a better deal is still possible. In addition, you can consider consulting refinance aggregators like Way.com to get the best refinance available for you.
How to choose the right auto loan term for you
Both long and short loan terms have their pros and cons, and you’ll have to weigh them against each other to decide which is best for you. However, when trying to figure out how long your loan should be, you should keep in mind that:
- Longer loan terms mean lower monthly payments and better affordability. But they cost more in the long run and make it more likely that you’ll fall behind on your payments.
- Short loan terms mean you have to pay more each month, but you pay less interest and take less risk.
- Most of the time, you should get a loan with the shortest term you can handle. To determine where that fits in terms of 36-, 48-, 60-, 72-, or 84-month loans, you’ll need to look at your income, savings, and the car you want to buy.
Bottom line
Even though the rates you can get for financing a car depend on a lot of things you can’t control, there are still things you can do to put yourself in charge of this big buy. Take the time to look at different rates and fix up your credit score so you can get better rates. This is especially important because prices will increase for everyone next year. Current interest rates will make monthly payments more expensive, so be patient and think about how to save money in the long run.
Frequently asked questions
Is it smart to do a 72-month car loan?
A 72-month auto loan may make sense in some situations, but it is usually only available if you have good credit. When you have bad credit, a 72-month vehicle loan may appear enticing owing to the reduced monthly payment, but in reality, you will most likely pay more than you bargained for.
What is a good term length for a car loan?
On the other hand, loan lengths of three to five years are rather frequent. Loans made during this time period frequently have fair interest rates and monthly payments, but it all depends on the loan terms you may qualify for. The majority of car loans are available in 12-month increments.
Is 7 years bad for a car loan?
Even though your monthly payments are smaller, a 7-year car loan will result in significant interest payments. You definitely have to watch your wallet.
Is 60 months too long for a car loan?
You can finance your vehicle for as little as a few months up to 84 months, or seven years. 72 months or six years is the most typical period, followed by 84 months. The longer the loan term, the lower your monthly payments will be, but the overall interest will be higher.
Sources
Experian: ww.experian.com
Federal Reserve Bank of New York: www.newyorkfed.org
Edmunds: www.edmunds.com
LendingTree: www.lendingtree.com/auto/debt-statistics/
Bankrate: www.bankrate.com/loans/auto-loans/average-monthly-car-payment/
